Racing for super app supremacy

Grab and Gojek have diversified their services.

A push by corporates to become super app operators like the case of Malaysian-based airline AirAsia casts light on their determination to create ecosystems that could drive down costs and expand customer bases through integrated services, say business pundits.

On Wednesday, AirAsia announced it would acquire Indonesian ride-hailing and payments firm Gojek’s Thailand business, saying the deal is the right move to leverage the know-how of Gojek and integrate it with the stronger brand of AirAsia which is looking to expand into food deliveries and fintech services.

A series of companies are striving to achieve merger and acquisition deals to expand their reach to boost revenue streams as existing businesses run out of steam.

Business experts believe a super app war is approaching in the digital economy as corporates are gathering a broad range of services, such as transport, logistics, travel, e-commerce, food delivery and online payments under one app.

According to the “e-Conomy 2020” report jointly conducted by Google, Temasek and Bain & Co, Southeast Asia added 40 million new internet users alone in 2020, up from 360 million in 2019.

The report shows the internet economy remained resilient at US$100 billion (3.25 trillion baht) in gross merchandise value (GMV) by the end of 2020. It is set to grow to over $300 billion in GMV by 2025.

The internet economy, based on the report, covers e-commerce, transport and food, online travel, online media and financial services.

This shows there is a strong momentum for the internet economy in the region despite the Covid-19 crisis.

Gojek riders stand by at a distribution centre in Surabaya, Indonesia. (Photo: AFP)

Competition game

“Super apps have led to a competition in which players want to create their own ecosystems to provide multiple services to customers to gain revenue,” Suthikorn Kingkaew, a project leader at Thammasat University Research and Consultancy Institute, told the Bangkok Post.

Super apps, he said, emerged around 2015-16, starting with messaging apps such as WeChat and Line. Later, they expanded into more services and opened up to partners to integrate their services for user convenience.

Startup unicorns such as Grab and Gojek started as ride-hailing and food delivery services but have expanded their reach into other areas.

AirAsia now offers a broad variety of services through their super app besides travel and hotel bookings, which is pressuring other existing players like Grab to adjust, Mr Suthikorn said.

AirAsia can now leverage the data it collects from its customers to provide even more services. Its customers can fly, reserve hotel rooms, book car pickup services and even open the door of hotel rooms all directly through its app.

“Hyper-competition always bring more innovation. This is similar to what has happened in Germany where automakers are locked in heavy competition, which has allowed the country to become a leading auto exporter,” he said.

According to him, the government should support cross-sector competition as it would be a boon for innovation.

Why this ecosystem?

Offering multiple services within its own ecosystem leads to value creation for brands and boosts customer experience as they can collect loyalty points across different services, Mr Suthikorn said.

A company with its own ecosystem can have more bargaining power with suppliers and service providers in line with economy of scale.

“They can force partners to reduce prices by bundling services while gaining margins from partners and users,” he said.

Alex Ng, chief executive of Kerry Express Thailand, a major parcel delivery operator, brushed aside concerns about the competition that could arise from AirAsia within delivery services as AirAsia also has aircraft to ship goods.

According to him, cross-border delivery is mainly carried out in high volume through sea links and less by air.

Kerry also has a hub-and-spoke logistics network countrywide for its delivery service while Grab and Gojek are still focused on point-to-point services.

A man walks past the logo of AirAsia at Don Mueang International Airport.

Cross border e-commerce

Pawoot Pongvitayapanu, an e-commerce market pundit, said AirAsia’s acquisition would make the firm a complete travel and transport service provider from “air to ground” and allow it to achieve last-mile delivery to customers.

He said AirAsia’s super apps will trigger intense competition, not just in the travel sector but in cross-border e-commerce delivery as well.

The company also has a Teleport logistics network, which can facilitate food and parcel deliveries in different cities with same-day shipments.

“With airfreight having more volume, particularly between Singapore, Malaysia and Thailand, this would make the cost of cross-border deliveries more affordable,” he said. Online merchants could also leverage its digital payment services through AirAsia’s BigPay.

In the travel sector, AirAsia can offer a complete service ranging from air tickets, hotels to car service bookings through its ecosystem, allowing it to differentiate itself from others.

“Digital services will become a new revenue stream that helps offset declining earnings from the airline business,” he said.

Mr Pawoot said AirAsia’s acquisition of Gojek’s operation in Thailand did not come at a high price. Gojek still has a small market share in Thailand’s food delivery market and is racked with losses.

Velox Digital Co, which operates Gojek’s business in Thailand, reported 184 million baht in revenue in 2020, up 38% year-on-year. Meanwhile, it was wracked by losses worth 294 million baht in the same year, improving from a loss of 1 billion baht a year before.

The firm had 38 million baht in total assets in 2020, down 89.5% year-on-year.